Let me begin by saluting the new speaker of the House, and
thanking him for extending invitations to two special guests who
are sitting in the gallery with Mrs. Hastert. Lyn Gibson and Wei
Ling Chestnut are the widows of the two brave Capitol Police
officers who gave their lives to defend freedom's house.

I stand before you to report that America has created the
longest peacetime economic expansion in our history -- with nearly
18 million new jobs, wages rising at more than twice the rate of
inflation, the highest homeownership in history, the smallest
welfare rolls in 30 years -- and the lowest peacetime unemployment
since 1957.

For the first time in three decades, the budget is balanced.
From a deficit of $290 billion in 1992, we had a surplus of $70
billion last year. We are on course for budget surpluses for the
next 25 years.

Violent crime is the lowest in a quarter century. Our
environment is the cleanest in a quarter century.

America is a strong force for peace from Northern Ireland, to
Bosnia, to the Middle East.

Thanks to the pioneering leadership of Vice President Gore, we
have a government for the information age. Once again, our
government is a progressive instrument of the common good, rooted
in our oldest values: opportunity, responsibility, community. A
modern government, devoted to fiscal responsibility and determined
to give our people the tools they need to make the most of their
own lives. A 21st century government for 21st century America.

My fellow Americans, I stand before you to report that the state
of our union is strong.

America is working again. The promise of our future is
limitless. But we cannot realize that promise if we allow the hum
of our prosperity to lull us into complacency. How we fare as a
nation far into the 21st century depends upon what we do as a
nation today.

So with our budget surplus growing, our economy expanding, our
confidence rising, now is the moment for this generation to meet
our historic responsibility to the 21st century. Let's get to work.

The Aging of 21st Century America

Our fiscal discipline gives us an unsurpassed opportunity to
address a remarkable new challenge: the aging of America.

With the number of elderly Americans set to double by 2030, the
baby boom will become a senior boom.

So first and above all, we must save Social Security for the
21st century.

Early in this century, being old meant being poor. When
President Roosevelt created Social Security, thousands wrote to
thank him for eliminating what one woman called the "stark terror
of penniless, helpless old age." Even today, without Social
Security, half our nation's elderly would be forced into poverty.

Today, Social Security is strong. But by 2013, payroll taxes
will no longer be sufficient to cover monthly payments. And by
2032, the trust fund will be exhausted, and Social Security will be
unable to pay out the full benefits older Americans have been
promised.

The best way to keep Social Security a rock-solid guarantee is
not to make drastic cuts in benefits; not to raise payroll tax
rates; and not to drain resources from Social Security in the name
of saving it.

Instead, I propose that we make the historic decision to invest
the surplus to save Social Security.

Specifically, I propose that we commit 60 percent of the budget
surplus for the next 15 years to Social Security, investing a small
portion in the private sector just as any private or state
government pension would do. This will earn a higher return and
keep Social Security sound for 55 years.

But we must aim higher. We should put Social Security on a sound
footing for the next 75 years. And we should reduce poverty among
elderly women, who are nearly twice as likely to be poor as other
seniors -- and we should eliminate the limits on what seniors on
Social Security can earn.

These changes will require difficult but fully achievable
choices. They must be made on a bipartisan basis. They should be
made this year. I reach out my hand to those of you of both parties
in both houses and ask you to join me in saying: We will save
Social Security now.

Last year, we wisely reserved all of the surplus until we knew
what it would take to save Social Security. Again, I say, we should
not spend any of it until after Social Security is truly saved.
First things first. Second, once we have saved Social Security, we
must fulfill our obligation to save and improve Medicare. Already,
we have extended the life of Medicare by 10 years -- but we should
extend it for at least another decade. Tonight I propose that we
use one out of every six dollars in the surplus over the next 15
years to guarantee the soundness of Medicare until the year 2020.

But again, we should aim higher. We must be willing to work in a
bipartisan way and look at new ideas, including the upcoming report
of the bipartisan Medicare commission. If we work together, we can
secure Medicare for the next two decades and cover seniors'
greatest need -- affordable prescription drugs.

Third, we must help all Americans, from their first day on the
job, to save, to invest, to create wealth. From its beginning,
Americans have supplemented Social Security with private pensions
and savings. Yet today, millions of people retire with little to
live on other than Social Security. Americans living longer than
ever must save more than ever.

Therefore, in addition to saving Social Security and Medicare, I
propose a new pension initiative for retirement security in the
21st century.

I propose that we use 11 percent of the surplus to establish
universal savings accounts -- USA accounts -- to give all Americans
the means to save. With these new accounts, Americans can invest as
they choose, and receive funds to match a portion of their savings,
with extra help for those least able to save.

USA accounts will help all Americans to share in our nation's
wealth, and to enjoy a more secure retirement.

Fourth, we must invest in long-term care. I propose a tax credit
of $1,000 for the aged, ailing or disabled and the families who
care for them. Long-term care will become a bigger and bigger
challenge with the aging of America -- and we must help our families
deal with it.

I was born in 1946, the first year of the baby boom. I can tell
you: Our generation is determined not to let our growing old place
an intolerable burden on our children and their ability to raise
our grandchildren. Our economic success and fiscal discipline now
give us the opportunity to lift that burden.

Saving Social Security and Medicare is the right way to use the
surplus. If we do so, we will still have the resources to meet
urgent national needs in education and defense. And this plan is
fiscally sound. And listen to this: By saving the money we need to
save Social Security and Medicare, then within 15 years we will
achieve the lowest level of publicly held debt since 1917.

With these four measures -- saving Social Security, strengthening
Medicare, establishing USA accounts, and supporting long-term care
-- we can begin to meet our generation's historic responsibility to
establish true security for 21st century seniors.

21st Century Schools

There are more children, from more diverse backgrounds, in our
public schools than at any time in our history. Their education
must provide the knowledge and nurture the creativity that will
allow our nation to thrive in the new economy. Today we can say
something we could not say six years ago: with more affordable
student loans, more Pell grants and work-study jobs, education
IRAs, a lifetime learning tax credit for junior and senior year of
college, and the new HOPE scholarship tax cut that more than 5
million Americans will receive this year, we have opened the doors
of college to all.

With our help, nearly every state has set higher academic
standards for public schools, and a voluntary national test is
being developed to measure the progress of our students. With over
one billion dollars in discounts available this year, we are on our
way to our goal of connecting every classroom and library to the
Internet.

Last fall, you passed our proposal to start hiring 100,000 new
teachers to reduce class size in the early grades. Now I ask you to
finish the job.

Our children are doing better. SAT scores are up. Math scores
have risen in nearly all grades. But there is a problem: While our
fourth-graders outperform their peers in other countries in math
and science, our eighth-graders are around average, and our
12th-graders rank near the bottom.

We must do better. Each year the national government invests
more than $15 billion in our public schools. I believe we must
change the way we invest that money, to support what works and to
stop supporting what doesn't.

Later this year, I will send Congress a plan that for the first
time holds states and school districts accountable for progress and
rewards them for results. My Education Accountability Act will
require every school district receiving federal help to take the
following five steps.

First, all schools must end social promotion.

No child should graduate from high school with a diploma he or
she can't read. We do our children no favors when we allow them to
pass from grade to grade without mastering the material.

But we can't just hold students back when the system fails them.
So my balanced budget triples the funding for summer school and
after school programs. We can keep one million students learning
beyond regular school hours, when parents work and juvenile crime
soars.

If you doubt this will work, look at Chicago, which ended social
promotion and made summer school mandatory for those who don't
master the basics. Math and reading scores are up three years
running -- with some of the biggest gains in some of the poorest
neighborhoods.

Second, all states and school districts must turn around their
worst performing schools -- or shut them down. That is the policy
established by Gov. Jim Hunt in North Carolina, where test scores
made the biggest gains in the nation last year. My budget includes
$200 million to help states turn around their failing schools.

Third, all states and school districts must be held responsible
for the quality of their teachers. The great majority of teachers
do a fine job. But in too many schools, teachers don't have college
majors -- or even minors -- in the subjects they teach.

New teachers should be required to pass performance exams. All
teachers should know the subjects they are teaching. My balanced
budget contains new resources to help them reach higher standards.

To attract talented young teachers to the toughest assignments,
I recommend a sixfold increase in scholarships for college students
who commit to teach in the inner cities, isolated rural areas and
Indian communities.

Fourth, we must empower parents with more information and more
choices. In too many communities, it is easier to get information
on the quality of the local restaurants than on the quality of the
local schools. Every school district should issue report cards on
every school.

And parents should have more choice in selecting their public
schools. When I became president, there was one independent, public
charter school in all of America. With our support, there are 1,100
today. My budget assures that early in the next century, there will
be 3,000.

Fifth, to ensure that our classrooms are truly places of
learning, all states and school districts must adopt and implement
discipline policies.

Now, let's do one more thing for our children. Today, too many
of our schools are so old they're falling apart, or so overcrowded
students must learn in trailers. Last fall, Congress missed the
opportunity to change that. This year, with 53 million children in
our schools, Congress must not miss that opportunity again. I ask
you to help our communities build or modernize 5000 schools.

If we do these things -- end social promotion, turn around
failing schools, build modern ones, support qualified teachers,
promote innovation, competition and discipline -- we will begin to
meet our generation's historic responsibility to create 21st
century schools.

21st Century Support For American Families

We must do more to help the millions of parents who give their
all every day at home and at work.

The most basic tool of all is a decent income. Let's raise the
minimum wage by a dollar an hour over the next two years.

And let's make sure women and men get equal pay for equal work
by strengthening enforcement of equal pay laws.

Working parents also need quality child care. Again, I ask
Congress to support our plan for tax credits and subsidies for
working families, improved safety and quality, and expanded
after-school programs. Our plan also includes a new tax credit for
stay-at-home parents. They need support too.

The Family Medical Leave Act -- the first bill I signed into law
-- has helped millions of Americans care for a new baby or an ailing
relative without risking their jobs. We should extend family leave
to 10 million more Americans working in smaller companies.

Parents should never face discrimination in the workplace. I
will ask Congress to prohibit companies from refusing to hire or
promote workers simply because they have children.

America's families deserve the world's best medical care.

Thanks to bipartisan federal support for medical research, we
are on the verge of new treatments to prevent or delay diseases
from Parkinsons to Alzheimers, from arthritis to cancer.

Managed care has transformed medicine in America -- driving down
costs, but threatening to drive down quality as well. I say to
every American: You should have the right to know all your medical
options -- not just the cheapest. You should have the right to see a
specialist. You should have the right to emergency care. You should
have the right to continuity of care -- to keep your doctor during a
pregnancy or chemotherapy or some other treatment.

I have ordered that these rights be extended to the 85 million
Americans served by Medicare, Medicaid and other federal health
plans. But only Congress can enact the Patients' Bill of Rights for
all Americans in all health plans. Last year, Congress missed that
opportunity. This year, for the sake of our families, Congress must
not miss that opportunity again. Pass the Patients' Bill of Rights.

There's one more right you should have. As more of our medical
records are stored electronically, the threats to our privacy
increase. Because Congress has given me the authority to act if it
does not do so by August, one way or another, we will protect the
privacy of medical records this year.

Two years ago, we acted to extend health coverage to up to 5
million children. Now, we should make it easier for small
businesses to offer health insurance, and to give people between
the ages of 55 and 65 who lose their health insurance the chance to
buy into Medicare. No one should have to choose between keeping
health care and taking a job. We should pass the landmark
bipartisan legislation, proposed by Senators Jeffords, Kennedy,
Roth and Moynihan, to allow people with disabilities to keep health
insurance when they go to work.

We need to enable public hospitals, and community and university
health centers, to provide basic, affordable care for working
families without insurance. My balanced budget makes a down payment
toward that goal.

We must continue to ensure access to family planning. And we
must step up our efforts to treat and prevent mental illness. No
American should ever be afraid to address this disease. This year,
we will host a White House Conference on Mental Health. With
sensitivity and commitment, Tipper Gore is leading our efforts here
-- and I thank her. As everyone knows, our children are targets of a
massive media campaign to hook them on cigarettes. I ask this
Congress to resist the tobacco lobby. Together, let's reaffirm the
FDA's authority to protect children from tobacco, hold the tobacco
companies accountable, and protect tobacco farmers.

If we act in these areas -- minimum wage, family leave, child
care, health care and the safety of our children -- we will begin to
meet our generation's historic responsibility to strengthen our
families for the 21st century.

A 21st Century Economy

Today, America is the most dynamic, competitive, job creating
economy in history.

But we can do even better -- in building a 21st century economy
for all Americans.

Today's income gap is largely a skills gap. Last year, Congress
passed a law enabling workers to get a skills grant to choose the
training they need. This year, I recommend a five-year commitment
in this new system so that we can provide that training for all
Americans who lose their jobs, and rapid response teams to help
towns where factories have closed. And I ask for a dramatic
increase in federal support for adult literacy, so we can mount a
national campaign aimed at millions of working people who read at
less than a fifth-grade level.

In the past six years, we have cut the welfare rolls nearly in
half. Two years ago, from this podium, I asked five companies to
lead a national effort to hire people off welfare. Tonight, our
Welfare to Work Partnership includes 10,000 companies who have
hired hundreds of thousands of people. Our balanced budget will
help another 200,000 people move to the dignity and pride of work.

We must bring the spark of private enterprise to every community
in America -- to inner cities and remote rural areas -- with more
support for community development banks, empowerment zones and
100,000 vouchers for affordable housing. And I ask Congress to
support our bold plan to help businesses raise up to $15 billion of
private sector capital to bring jobs and opportunity to our inner
cities and rural areas -- with tax credits and loan guarantees,
including new American Private Investment Companies modeled on our
Overseas Private Investment Corporation. Our greatest untapped
markets are not overseas -- they are right here at home.

We must bring prosperity back to the family farm. Dropping
prices and the loss of foreign markets have devastated too many
family farmers. I am ready to work with lawmakers of both parties
to create a farm safety net including crop insurance reform and
farm income assistance.

We must strengthen our lead in technology.

Government investment led to the creation of the Internet. I
propose a nearly 30 percent increase in long-term computing
research.

We must be ready for the 21st century from its very first
moment, by solving the "Y2K" computer problem. If we work hard
with state and local governments and businesses large and small,
the "Y2K problem" can be remembered as the last headache of the
20th century, not the first crisis of the 21st.

For our own prosperity, we must support economic growth abroad.

Until recently, one-third of our economic growth came from
exports. But over the past year and a half, financial turmoil
overseas has put that growth at risk. Today, much of the world is
in recession, with Asia hit especially hard.

This is the most serious financial crisis in a half century. To
meet it, the U.S. and other nations have reduced interest rates and
strengthened the International Monetary Fund. While the turmoil is
not over, we are working with other industrial nations to contain
it.

At the same time, we will continue to work on a global basis to
build a financial system for the 21st century that promotes
prosperity and tames the cycles of boom and bust. This June I will
meet with other world leaders to advance this historic purpose.

We must also create a freer and fairer trading system for the
21st century. Trade has divided Americans for too long. We must
find the common ground on which business, workers,
environmentalists, farmers and government can stand together.

We must tear down barriers, open markets, and expand trade. At
the same time, we must ensure that ordinary citizens in all
countries benefit from trade -- trade that promotes the dignity of
work, the rights of workers, the protection of the environment. And
we must insist that international trade organizations be open to
public scrutiny.

We must enforce our trade laws when imports unlawfully flood our
nation. I have already informed the government of Japan that if
that nation's sudden surge of steel imports into our country is not
reversed, America will respond.

And we must act to help all American manufacturers hit hard by
the present crisis -- with loan guarantees and other incentives to
increase U.S. exports by nearly $2 billion.

We can achieve a new consensus on trade, based on these
principles. I ask Congress to join me in this common approach and
give the president the trade authority long used to advance our
prosperity.

This year, we should expand trade with our neighbors in Central
America and the Caribbean. And because trade and investment are the
keys to African development -- we must finally pass the African
Growth and Opportunity Act.

And tonight, I also issue a call to the nations of the world to
join the United States in a new round of global negotiations to
expand exports of services, of manufactures, and most of all, farm
products.

We will work with the International Labor Organization on a new
initiative to lift up labor standards around the world. And this
year, we will lead the international community to conclude a treaty
to ban abusive child labor everywhere in the world.

If we do these things -- invest in our people, our communities,
and our technology, and lead in the global economy -- then we will
begin to meet the historic responsibility of our generation to
build a 21st century prosperity for America.

A Strong America in a New World

No nation in history has had the opportunity and the
responsibility we now have to shape a world more peaceful, secure
and free.

All Americans can be proud that our leadership helped to bring
peace in Northern Ireland.

All Americans can be proud that our leadership has put Bosnia on
the path to peace. And with our NATO allies, we are pressing the
Serbian government to stop its brutal repression in Kosovo, to
bring those responsible to justice, and give the people of Kosovo
the self-government they deserve.

All Americans can be proud that our leadership renewed hope for
lasting peace in the Middle East. Some of you were with me in
December as we watched the Palestinian National Council completely
renounce its call for the destruction of Israel. I ask Congress to
provide resources to implement the Wye Agreement -- to protect
Israel's security, stimulate the Palestinian economy, and support
our friends in Jordan. We must not, we dare not, let them down.

As we work for peace, we must also meet threats to our nation's
security -- including increased dangers from outlaw nations and
terrorism. We will defend our security wherever we are threatened --
as we did this summer when we struck at Osama bin Laden's network
of terror. The bombing of our embassies in Kenya and Tanzania
reminds us of the risks faced every day by those who represent
America to the world. Let's give them our support, the safest
possible workplaces, and the resources they need so America can
continue to lead.

We will work to keep terrorists from disrupting computer
networks, to prepare local communities for biological and chemical
emergencies, and to support research into vaccines and treatments.

We must increase our efforts to restrain the spread of nuclear
weapons and missiles, from North Korea to India and Pakistan.

We must expand our work with Russia, Ukraine and the other
former Soviet nations to safeguard nuclear materials and technology
so they never fall into the wrong hands. My balanced budget will
increase funding for these critical efforts by almost two-thirds
over the next 5 years.

With Russia, we must continue to reduce our nuclear arsenals.
The START II treaty and the framework we have already agreed to for
START III could cut them by 80 percent from their Cold War height.

It has been two years since I signed the Comprehensive Test Ban
Treaty. If we don't do the right thing, other nations won't either.
I ask the Senate to take this vital step: Approve the treaty now,
so we can make it harder for other nations to develop nuclear arms
-- and we can end nuclear testing forever.

For nearly a decade, Iraq has defied its obligation to destroy
its weapons of terror and the missiles to deliver them. America
will continue to contain Saddam -- and we will work for the day when
Iraq has a government worthy of its people.

Last month, in our action over Iraq, our troops were superb.
Their mission was so flawlessly executed, we risk taking for
granted the bravery and skill it required. Captain Jeff Taliaferro,
a 10-year Air Force veteran, flew a B-1B bomber over Iraq as we
attacked Saddam's war machine. He is here with us tonight. Let us
honor him and all the 33,000 men and women of Desert Fox.

It is time to reverse the decline in defense spending that began
in 1985. Since April, together we have added nearly $6 billion to
maintain our readiness. My balanced budget calls for a sustained
increase over the next six years for readiness and modernization,
and pay and benefits for our troops.

We are the heirs of a legacy of bravery represented by millions
of veterans. America's defenders today stand ready at a moment's
notice to go where comforts are few and dangers are many, doing
what needs to be done as no one else can. They always come through
for America. We must come through for them.

The new century demands new partnerships for peace and security.

The United Nations plays a crucial role, with allies sharing
burdens America might otherwise bear alone. America needs a strong
and effective U.N. I want to work with this new Congress to pay our
dues and our debts.

We must support security in Europe and Asia -- expanding NATO and
defining its new missions at its 50th anniversary summit this year
in Washington, maintaining our alliance with Japan and Korea, and
our other Asian allies, and engaging China.

In China, I said to the leaders and people what I say again
tonight: Stability can no longer be bought at the expense of
liberty. And I say again the American people: It is important not
to isolate China. The more we bring China into the world, the more
the world will bring change and freedom to China.

Last spring, with some of you, I traveled to Africa, where I saw
democracy and reform rising, but still held back by violence and
disease. We must fortify African democracy and peace -- and support
the transition to democracy now beginning to take hold in Nigeria.

We are strengthening our ties to the Americas -- to educate
children, fight drugs, deepen democracy. And to increase shared
prosperity, we will work to launch a Free Trade Area of the
Americas.

In this hemisphere, every government but one is freely chosen by
its people. We are determined that Cuba, too, will know the
blessings of liberty.

The American people have opened their arms and their hearts to
our Central American and Caribbean neighbors devastated by recent
hurricanes. Working with Congress, we will help them rebuild. When
the first lady and Tipper Gore visited the region, they saw
thousands of American troops and volunteers. In the Dominican
Republic, Hillary helped to rededicate a hospital that had been
rebuilt by Dominicans and Americans, working side by side.